"China will need to develop its reserves domestically and invest overseas, or else develop low uranium consumption technology," Ruan said during a ceremony to mark the signing of the memorandum of understanding in Beijing.
Government-owned AECL has built two reactors for Phase III of China's Qinshan nuclear power plant, in the eastern province of Zhejiang, using the CANDU pressure tube design.
CANDU uses about 15 percent less uranium for each megawatt of electricity produced than the pressurized water reactors (PWR) that China now favors.
AECL hopes the cooperation with the institute, in the southwestern city of Chengdu, will lead to future reactor contracts, said Simon Pang, vice president of special projects.
The cooperation will involve study advanced fuel cycles, using thorium as a fuel, and other technologies.
China is one of the world's top three nations in terms of reserves of thorium, a metal that along with uranium contributes to the heat of the earth.
CANDU, developed to burn lower grade natural uranium, is found in reactors in Canada, Argentina, South Korea, India and Pakistan. It can burn spent PWR fuel and recovered uranium, as well as plutonium.
Canada has so far taken a back seat to the United States, Russia and France in supplying nuclear technology to China, which also uses domestically developed models.